Continuous Compounding and Nominal Rate of Interest Quiz
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Questions and Answers

What is the formula for computing simple interest?

  • I = Pin (correct)
  • I = P(i + n)
  • I = P(i - n)
  • I = P(1 + in)
  • Who is a lender or creditor?

  • An individual who reviews loan applications
  • An individual who invests money or makes funds available (correct)
  • An individual who receives funds from a borrower
  • An individual who owes money
  • What does the term 'maturity value' refer to in a loan context?

  • The total interest earned by the lender
  • The total repayment amount a borrower has to pay at maturity (correct)
  • The date on which money is received by the borrower
  • The amount borrowed by the borrower
  • In compound interest, what does 'interest is computed on the accumulated past interest' mean?

    <p>Interest is calculated on the principal and past interest earned</p> Signup and view all the answers

    What does the formula F = P(1 + in) represent?

    <p>An incorrect formula for compound interest</p> Signup and view all the answers

    What does 'revised by Department Chair' signify in the provided text?

    <p>A person responsible for reviewing course module documents</p> Signup and view all the answers

    In ordinary simple interest, how many days are considered in a banker's year?

    <p>360 days</p> Signup and view all the answers

    How many days are considered in exact simple interest for an ordinary year?

    <p>365 days</p> Signup and view all the answers

    Which of the following is NOT a characteristic of leap years according to the text?

    <p>Including the century years like 1900</p> Signup and view all the answers

    If the number of days in an interest period is 68, the formula to calculate the ordinary simple interest would be:

    <p>$P \times I \times \frac{68}{360}$</p> Signup and view all the answers

    If the interest period has 50 days in a leap year, how much would be the exact simple interest using a principal amount P and interest rate I?

    <p>$P \times I \times \frac{50}{366}$</p> Signup and view all the answers

    What is the nominal rate of interest for an account that compounds quarterly if the quoted rate is 12%?

    <p>4%</p> Signup and view all the answers

    What is the total number of days from July 12 to September 12?

    <p>62 days</p> Signup and view all the answers

    If a sum of ₱5,000 is deposited at a nominal rate of interest of 6% compounded semi-annually, what will it become after 2 years?

    <p>₱6,010.40</p> Signup and view all the answers

    In the compound interest formula 𝑃 = 𝐹 / (1 + 𝑖)^𝑡, what does 𝑃 represent?

    <p>Present value</p> Signup and view all the answers

    If an amount grows to ₱15,000 after 5 years at an interest rate of 8% compounded annually, what was the initial principal amount?

    <p>₱10,000</p> Signup and view all the answers

    For an account compounding quarterly at a nominal rate of 6%, what is the interest rate per period?

    <p>2.25%</p> Signup and view all the answers

    If an investment triples in value after 12 years at an annual interest rate of 10%, what was the effective annual rate of compound interest?

    <p>15%</p> Signup and view all the answers

    What is a potential drawback of obtaining capital through long-term loans?

    <p>High interest rates</p> Signup and view all the answers

    What factor can lead to the end of a partnership according to the text?

    <p>Provision for settlement of disputes</p> Signup and view all the answers

    What usually happens when partners have almost equal shares in a business according to the text?

    <p>Divided authority among partners</p> Signup and view all the answers

    In case of bankruptcy, who is liable for all the liabilities of the enterprise?

    <p>One partner</p> Signup and view all the answers

    What is a key provision mentioned in a partnership contract document?

    <p>Insurance on lives of partners</p> Signup and view all the answers

    What does the accounting period provision in a partnership contract refer to?

    <p>Duration for financial reporting</p> Signup and view all the answers

    What does working capital refer to?

    <p>Funds required for daily operations</p> Signup and view all the answers

    Which type of working capital is needed at the beginning of operations?

    <p>Initial working capital</p> Signup and view all the answers

    What is the main advantage of a sole proprietorship?

    <p>Ease of organization</p> Signup and view all the answers

    Who bears all the losses in a sole proprietorship?

    <p>Sole proprietor</p> Signup and view all the answers

    Which type of working capital is usually smaller, initial or regular?

    <p>Regular working capital</p> Signup and view all the answers

    What is the simplest form of business organization according to the text?

    <p>Sole proprietorship</p> Signup and view all the answers

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